16 October 2018 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

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The gold price began to work its way quietly higher almost the moment that trading began at 6:00 p.m. EDT on Sunday evening in New York.  That state of affairs lasted until a few minutes before 2 p.m. China Standard Time on their Monday afternoon — and at that juncture, the rally became far more serious.  The good times ended at the 10:30 a.m. BST morning gold fix in London — and the price was sold quietly lower until around 11:30 a.m. in New York.  From that point the price chopped quietly sideways for the rest of the Monday session. 

The low and high ticks were reported by the CME Group as $1,220.40 and $1,236.90 in the December contract. 

Gold was closed in New York on Monday afternoon at $1,226.70 spot, up $9.20 on the day.  Net volume was reasonably healthy at just under 277,000 contracts — and roll-over/switch volume was another 7,029 contracts on top of that. 

It was mostly the same price path for silver.  Its rally also got capped and turned lower at the morning gold fix in London — and both rallies in COMEX trading in New York got hammered flat as well.  From there, the price continued lower until around 12:30 p.m. EDT — and from that point it traded quietly, but a bit unsteadily sideways until trading ended at 5:00 p.m. EDT. 

The low and high ticks in this precious metal were recorded as $14.615 and $14.805 in the December contract. 

Silver finished the day at $14.665 spot, up 8.5 cents from Friday’s close.  Net volume wasn’t overly heavy at just under 59,500 contracts — and there was 3,073 contracts worth of roll-over/switch volume in this precious metal. 

Platinum’s price was similar to gold and silver’s in most respects.  Its big rally attempts in Zurich trading weren’t allowed to get far — and about thirty minutes or so after the COMEX open, ‘da boyz’ in New York worked their magic.  By shortly before 1 p.m. EDT the selling pressure ended — and it traded sideways into the close from there.  Platinum finished the day at $940 spot, up 4 bucks on the day — and 9 dollars off its high tick. 

The palladium price stair-stepped its way higher in price after the Sunday evening open in New York — and was up 8 dollars by shortly before 11 a.m. in Zurich.  It jumped up a quick ten bucks from there.  From that point the price traded sideways until the COMEX open.  At that juncture, it ticked up to its $1,086 high of the day — and from there It was hammered lower into the Zurich close. An hour later, it rallied a bunch more, but obviously ran into ‘resistance’, because it wasn’t allowed much past the $1,080 spot mark by 1 p.m. EDT — and it didn’t do much after that.  Palladium was close on Monday in New York at $1,080 spot, up 17 dollars on the day — and 6 dollars off its high tick. 

The dollar index closed very late on Friday afternoon in New York at the 95.26 mark — and when trading began at 6:00 p.m. EDT in New York on Sunday evening, it jumped up 10 basis points.  From there, it chopped quietly sideways until 12:30 p.m. CST on their Monday afternoon. Then down it went.  The 94.96 low tick was set a very few minutes before 12 o’clock noon in London.  The two rally attempts after that had no staying power — and both collapsed back to about the low of the day.  But the third attempt was the charm, as it ‘rallied’ again starting minutes before noon in New York — and ended a few minutes after the 1:30 p.m. COMEX close.  From that point it drifted unsteadily lower until trading ended.  The dollar index finished the Monday session at 95.06…down 20 basis points from Friday’s close.  Here’s the intraday chart from midnight in New York/noon in Shanghai, onward…

And here’s the 3-day intraday chart, so you can see the ‘action’ from the 6 p.m. open in New York on Sunday evening.  The Friday dollar index price action is also there as well. 

And here’s the 6-month U.S. dollar index chart — and the delta between its close on Monday — and the close on the intraday chart above, is 31 basis points. 

The gold stocks jumped up a bit over 2 percent at the open — and their respective high ticks came shortly after 10 a.m. in New York trading.  From that juncture they began to chop quietly lower, with their low ticks coming a minute or so before 2 p.m. EDT.  They rallied a bit from there, but ran into day-trader selling in the last hour — and the HUI finished higher by only 1.71 percent. 

The silver equities followed an almost identical price path as their golden brethren on Monday — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 1.55 percent.  Click to enlarge if necessary. 

And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index. Click to enlarge as well. 

The CME Daily Delivery Report showed that 30 gold and 1 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  In gold, the two short/issuers were International F.C. Stone — and  Advantage, with 22 and 8 contracts out of their respective client accounts.  The largest long/stopper by far was JPMorgan, with 23 contracts for its client account.  In silver, ADM issued the lone contract — and HSBC USA stopped it for its own account.  The link to yesterday’s Issuers and Stoppers Report is here. 

The CME Preliminary Report for the Monday trading session showed that gold open interest in October fell by 160 contracts, leaving 1,098 still open, minus the 30 contracts mentioned just above.  Friday’s Daily Delivery Report showed that 60 gold contracts were actually posted for delivery today, so that means that 160-60=100 gold contracts disappeared from the October delivery month.  Silver o.i. in October fell by 20 contracts leaving, just 22 still around, minus the 1 contract mentioned in the previous paragraph.  Friday’s Daily Delivery Report showed that 20 silver contracts were actually posted for delivery today, so that means that the change in open interest matched deliveries for a change. 

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There was another deposit into GLD on Monday, as an authorized participant added 132,458 troy ounces of gold.  There were no reported changes in SLV. 

The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver ETFs as of the close of business on Friday, October 12 — and this is what they had to report.  Their gold ETF added 4,543 troy ounces — and their silver ETF added 30,061 troy ounces. 

There was a sales report from the U.S. Mint on Monday.  They sold 2,000 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — and 200,000 silver eagles. 

There wasn’t much activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  Nothing was reported received — and only 32.151 troy ounces/1 kilobar [SGE kilobar weight] was shipped out of Brink’s, Inc.  I won’t bother linking this. 

It was much busier in silver, of course, as 1,111,073 troy ounces were reported received — and 618,737 troy ounces shipped out.  JPMorgan picked up another 511,574 troy ounces — and a truck load…599,498 troy ounces…was dropped of at Canada’s Scotiabank.  In the ‘out’ category, one truck load…610,237 troy ounces…departed CNT — and the remaining 8,499 troy ounces was shipped out of Delaware.  The link to all this is here. 

Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, there was nothing reported received — and only 105 were shipped out.  I won’t bother linking this activity, either. 

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Here are two charts that Nick Laird passed around on Monday evening.  They show gold and silver imports into India, updated with August’s data.  During the month they imported 95 tonnes/3.05 million troy ounces of gold — and 324.9 tonnes/10.6 million troy ounces of silver.  Click to enlarge for both charts. 

CRITICAL READS

$1.4 Million… Right Into the Shredder — Bill Bonner

So if sane investors could buy bonds at negative interest rates – implying that they were willing to wait until hell freezes over to make any money – why shouldn’t compos mentis art lovers spend fake money on fake art? Banksy mocked the silliness of it in 2014, when Sotheby’s auctioned off a gilded frame alleged to be by the artist himself. In it, he had stenciled, “I can’t believe you morons actually buy this sh*t.”

The same might be said for hundreds of stocks and bonds – especially those in the tech sector.

As in the dot-com bubble of 1999, many of these stocks are selling far beyond any reasonable expectation of compensatory earnings. Like squirrelly works of art, people just buy them because it makes them feel cool… and they think they might go up in value.

And the odds were good. The Fed is still lending at or near the rate of consumer price inflation… and the European Central Bank and the Bank of Japan are still offering money at negative nominal rates.

With so much free money gushing into lightweight art and hollow stocks… what else could they do but float?

This interesting and humourous commentary by Bill put in an appearance on the bonnerandpartners.com Internet site on Monday — and another link to it is here.

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 Sears, Finally Bankrupt, Now Tries to Avoid ‘Dustbin of History’

Sears Holdings Corp. is embarking on its bankruptcy with key details still up in the air, including whether it will get a loan from Chairman Eddie Lampert that the 125-year-old chain needs to avoid being shut down forever.

Sears has some financing already in hand, along with plans to close stores, but it needs to know if Lampert will commit to lending another $300 million and buying some outlets. The company said it will try to reorganize around a smaller number of more profitable outlets, but also acknowledged it’s at risk of liquidating.

“Will Sears be relegated to the dustbin of history, and will 68,000 Americans lose their jobs, or will Sears enter the next chapter of its life as an iconic American company, enduring yet another shift in the retail landscape?” Chief Financial Officer Robert Riecker said in a court affidavit. The answer, he added, would be up to creditors and business partners, whose support is needed during the bankruptcy. Court papers filed early Monday estimates liabilities of $11.3 billion and assets of just $6.94 billion.

Sears said it’s still discussing $300 million in financing with Lampert, who stepped down as chief executive officer, and his ESL Investments Inc. hedge fund. Lampert engineered the $12.3 billion acquisition of Sears by Kmart in 2005, and has propped up the chain for years. He was holding about $2.66 billion in Sears debt as of September.

Lampert showed financial engineering genius in the way he merged Kmart and Sears, but the fact that his investments with Sears still aren’t sorted out as it enters bankruptcy shows that his reputation as a manager has suffered, says David Johnson, managing partner at Abraxas Group Inc., a Chicago-based business consulting firm. “Now he has to convince creditors, who have always looked at him with a jaundiced eye because he’s wearing three hats, to trust him.”

This Bloomberg story was posted on their website at 5:54 a.m. EDT on Monday — and was updated four hours later.  I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.  The Zero Hedge spin on this is headlined “Sears Files For Bankruptcy Protection, Lampert Steps Down As CEO” — and I thank Brad Robertson for that one.

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U.S. Spending on Interest Hits All Time High as Budget Deficit in Trump’s First Year Soars to $779 Billion

One month ago we already knew that the U.S. budget deficit for the 2018 fiscal year – Trump’s first full year in office – would be jarring after the August deficit soared to $211 billion, nearly double the deficit gap from one year ago (largely due to calendar quirks) which on a cumulative basis for the first 11 months of the fiscal year was a staggering $895 billion, $222 billion or 39% more than the previous year. This was largely due to outlays which climbed 7% while revenue rose a mere 1%.

Today at 2pm we got official confirmation of the rapid expansion in the US budget deficit when the Treasury announced that in Trumps first full fiscal year as president, the U.S. budget deficit grew 17% to $779 billion from $666 billion…the highest full year total since 2012 amid tax cuts and spending increases, if below the trailing 12 month total as of August which, as noted above, was a whopping $895 billion.

The budget gap for the 12 month period ended September was 17% greater than the same 12-month period a year earlier, as spending rose 3.2% and revenue gained just 0.4%.

The deficit as a share of GDP was 3.9% in fiscal 2018, up 0.4% point from the prior year.

To fund this deficit, the U.S. government borrowed $1.08 trillion from the public in Fiscal 2018, more than double the amount borrowed in 2017 ($498.3 billion) and the most borrowed from the public in a fiscal year since FY’12.

This 5-chart Zero Hedge news item showed up on their Internet site at 3:02 p.m. EDT on Monday afternoon — and I thank Brad Robertson for this one.  Another link to it is here.

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Shelves Empty as Specter of Hyperinflation Stalks Zimbabwe

Zimbabweans were optimistic about an economic revival when the military ousted Mugabe in November after almost four decades in power. That’s going to take time and will “entail pain and the need for sacrificing short-term gains for longer-term prosperity,” according to Finance Minister Mthuli Ncube, who Mnangagwa appointed last month to attract foreign investment, reduce mass unemployment and narrow a gaping fiscal deficit.

Inflationary Spiral

Ncube introduced a tax increase on money transfers last week to try to stabilize the government’s finances. The announcement triggered a rise in basic-commodity prices, stoking fears of an inflationary spiral and leading to queues at gas stations.

Many shops, under pressure from the government, are restricting customers’ purchases to prevent hoarding and ensure everyone gets something. Others have gone further: Yum! Brands Inc. temporarily shut some of its KFC outlets this week, saying it couldn’t find enough dollars to pay suppliers.

On Thursday, police arrested and beat two leaders of the country’s main trade union at protests over the increasing cost of living, the labor group said in a statement.

The country’s quasi-currency, the bond note, has plunged in value. It now takes 4.3 of them to buy one U.S. dollar, the weakest exchange rate on record, according to the Zim Bollar Index, a local website. In early September, the rate was 1.75.

The PHOTOS and the FUNNIES

Today’s ‘critter’ is the Steller’s jay…a bird I’ve featured before, but it’s been many years.  I saw quite a few of these when I was driving through the Rocky Mountains of British Columbia on the weekend…but still haven’t see one with camera in hand, alas.  It’s native to western North America, closely related to the blue jay found in the rest of the continent, but with a black head and upper body — and it shows a great deal of regional colour variation throughout its range.  Click to enlarge.

The WRAP

Everything was going swimmingly until the morning gold fix in London — and it was most likely JPMorgan that entered the futures market at that juncture to put the kibosh on what was obviously going to turn out well for precious metal investors.  But in the end, it was another day where we had to settle for crumbs.  It’s their world, dear reader.  They can do whatever they want — and no one, or no organization that is in a position to do anything about this, is going to utter a word of protest or raise a finger to help.  We, the stockholders, have been abandoned by the very organizations and mining companies that are sworn to look out after our best interests. 

Here are the 6-month charts for all four precious metals — and there’s certainly not much to see.  The ‘click to enlarge‘ only helps with the four precious metal charts. 

And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price has been wandering around a dollar either side of unchanged since trading began in New York at 6:00 p.m. on Monday evening.  At the moment, it’s down 50 cents an ounce.  Silver was up a nickel by 9:30 a.m. China Standard Time on their Tuesday morning, but has been sold unsteadily lower since — and is down 4 cents currently.  Platinum has been trading two bucks either side of unchanged in Far East trading — and it’s back at unchanged.  Palladium traded flat until just before 2 p.m. CST — and it’s down a dollar as Zurich opens.

Net HFT gold volume is coming up on 39,000 contracts — and there’s only 303 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is  already around 10,200 contracts — and there’s only 122 contracts worth of roll-over/switch volume in this precious metal.

The dollar index began to sink quietly as soon as trading began at 6 p.m. in New York yesterday evening — and it appeared to get ‘saved’ at the 95.00 mark a few minutes before 9 a.m. China Standard Time on their Tuesday morning.  It began to ‘rally’ unsteadily from that point.  It made it up to the 95.20 mark by around 1:25 p.m. CST — and has been sinking quietly since — and is up 5 basis points about thirty minutes before the London open.

Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report and, without doubt, the record long position in gold that was reported in my Saturday column, is most likely all gone — and then some…according to Ted.  Just how much, remains to be seen.  There will be deterioration in silver as well — and I’m sure that Ted will have something to say about this in his Wednesday missive.  He’s the real authority on all this — and I’ll ‘borrow’ a few sentences for my Friday column. 

And as I post today’s column on the website at 4:03 a.m. EDT, I see that gold is now up $2.10 the ounce  — and silver is back at unchanged after being down 6 cents at its current low tick. Platinum is now up 2 dollars — and palladium is back at unchanged.

Gross gold volume is about 55,500 contracts — and net of what little roll-over/switch volume there is, net HFT gold volume is around 54,800 contracts.  Net HFT silver volume is 13,800 contracts — and there’s still only 132 contract worth of roll-over/switch volume on top of that.

The dollar index continues to chop unsteadily lower — and is now down 4 basis points as of 8:30 a.m. BST in London — and sitting right at the 95.000 mark. 

That’s all I have for today — and I’ll see you here tomorrow. 

Ed